Withdrawing the tax free 25% in one lump, told not possible?

sham63

A relative has a Flexible Pension Plan with Aegon. He has turned 55 and has a lot of debt he wants to clear. He had approached Aegon and asked to take the tax-free 25% of the whole pension in one go.
 

He says he has been told this is not possible and can only take a lump sum comprising 25% tax free and 75% taxable. He does not want to do this as it will take him into higher rate tax.

Are they right in saying that he can’t take the whole tax-free element alone in one withdrawal?
Thanks! 

El_Torro

Legally he is allowed the 25% tax free lump sum. Either the Aegon plan he is on don't allow this or there has been miscommunication somewhere. 

One option would be to transfer the pension to a provider / plan that does allow it. 

GrumpyDil

Googling Aegon Flexible Pension Plan suggests that particular plan does not offer drawdown, which is the option your friend seems to want, although I'm not commenting on whether or not that is a good idea.

If he wants to use drawdown which would let him take 25% TFC and put the remainder into drawdown it looks like he would need to request a transfer to a pension which supports drawdown.

Linton

With old pension schemes set up before drawdown became available you were only allowed to withdraw the 25% and do something with the 75% like buy an annuity. Changing the procedures and software for old pension schemes when the rules changed was not worth the effort. So simply transfer the pension to a modern scheme, such as a SIPP, and you will have the full flexibility permitted by the law. 

dunstonh

Are they right in saying that he can’t take the whole tax-free element alone in one withdrawal?

Yes,  The Aegon Flexible pension plan is a personal pension that stopped being available for new business around 13 years ago.  It didn't support drawdown back then and it doesn't support drawdown now.

Marcon

GrumpyDil said:

If he wants to use drawdown which would let him take 25% TFC and put the remainder into drawdown it looks like he would need to request a transfer to a pension which supports drawdown.

...and it's easy enough for him to arrange the transfer himself. He doesn't need to pay anyone to do it for him.

Helpful reading: https://www.moneysavingexpert.com/savings/cheap-sipps/

sham63

Thank you everyone, brilliant advice as ever!